[ Nippon Keidanren ] [ Policy ]

Summary of Position Paper 2003
on Management and Human Resources

- Diversity Generating Dynamism and Creativity -

December 2002

Nippon Keidanren
(Japan Business Federation)

Along with the creation of the Japan Business Federation, Nikkeiren's Committee for the Study of labor Issues was reorganized into the Federation's Committee on Management and Labor Policy, which will henceforth issue a yearly Position Paper describing the Federation's basic policies on management and human resources.

Chapter 1. Economic and Management Issues

1. Responding to Globalization and Declining Competitiveness

Concerns on degradation of international competitiveness of Japan can only be assuaged if industries and enterprises take the initiative to set labor costs based on productivity, pursue productivity enhancement, add value to their operations, nurture new businesses, and improve their capacity to develop new technologies, products and services. This is necessary, since merely improving productivity, cutting costs and reducing prices could stimulate further deflation. Deflationary pressure can be eased if businesses concentrate on developing latent demand and providing new high added-value goods and services.
Improving productivity in low-productivity sectors, shifting resources from those sectors to high-productivity fields and new businesses, and expanding those fields can create new demand. This kind of structural reform can revive the economy, make sustainable growth possible, and stop industrial hollowing-out.

2. Dealing with Deflation

The deflation that we are experiencing today is the result of compound factors - shrinking demand after the bubble economy's collapse, coupled with oversupply, globalization of economic activity, and the decline in Japan's importance as a financial center, among others. Accordingly, the formula for dealing with deflation requires both demand- and supply-side measures, as well as a combination of appropriate taxation and financial measures.

3. Developing New Markets / 4. SMEs and Start-ups

Corporate structural reform is necessary for creating and bringing out latent demand in the domestic market. This requires innovation on the part of employers. If they are interested in developing new markets and their plans for doing so are implemented, the prospects for new industries will improve substantially. In particular, small and medium-size enterprises and start-ups have an important role to play in creating and setting up new businesses.

5. Corporate Governance and Business Ethics

Only with corporate governance can enterprises maintain and strengthen their competitiveness. Winning the trust and sympathy of the public and the market underlie corporate activities; companies lose their raison d'etre if these are adversely affected. The most important factors where enforcing corporate ethics is concerned are how senior management view the situation and how they act.

Chapter 2. Employment and Wages

1. Measures for Combating Worsening Unemployment

The factors behind the poor job situation and unemployment are varied and complex. The government, management and labor must work together to deploy a variety of effective employment measures over the short term and over the longer term as well. The most important task is to alleviate worry over employment, stimulate consumption and restore the economy to health. Every enterprise must do its best to maintain employment and, in addition, systematic employment measures must be introduced.

2. Macro-level Employment Measures

In the process of systematically implementing measures to allay anxiety over employment, it will be important to focus on maintaining employment and creating new jobs. Needs are particularly strong in livelihood-related areas, which can be a major source of new jobs. Loosening restrictions on new entrants to these fields will activate latent demand.
Expanding inward foreign direct investment is also important when it comes to creating more jobs. Creating an appealing business and investment climate for foreign businesses also means providing more favorable environment to business activity by Japanese enterprises.
Conditions must be improved to facilitate labor mobility, in order for the employment measures described above to work effectively. The heavily regulated labor market must be liberalized.

3. Promotion of Employment Diversity

To remain competitive in international markets, Japanese enterprises will require constant innovation, so they must cultivate a corporate culture that emphasizes creativity. We need companies replete with diversity that bring together people with various values and points of view and who can respect and stimulate each other. This strategy, which makes diversity of employment types more widespread, will bring more employment and work opportunities to older people, women and non-Japanese, who have been outside the mainstream corporate labor market so far.

4. Achieving Efficiency in Labor Costs

Enterprises' ability to pay has been severely affected by the recession, and many companies are being forced to lower wages. Labor and management should cooperate in raising ability to pay in a planned manner over the medium and long term. Unless added value, the source of labor costs and profits, is increased, enterprises will not be able to maintain employment, let alone wages.

Chapter 3. Education's Role in Developing Human Resources

1. The Role of the Family

In the coming years, lifestyles will vary greatly depending on individual preferences and attitudes and social diversity will become a driving force. This needs to be borne in mind in children's education too.

2. The Role of Schools

At the primary and secondary school levels of education, children should acquire scholastic ability that will serve as the foundation for future studies, and be taught to abide by social rules and ethics. At the university and graduate school level, students must be offered a broad range of opportunities to acquire education suitable for their motivation, ability and aptitudes. Moreover, at all stages of their education career, young people should be made aware of their role in society. They should be trained on a continuing basis to develop sound attitudes to work, develop a taste for, and learn the meaning and importance of work.

3. The Role of Enterprises

For promoting and improving of employees employability, companies must help them acquire new capacities, building on their already established skills and experience.
Pay systems must be improved to encourage employees to take the initiative in developing their abilities.
Enterprises should actively hire new school graduates and give them an opportunity to develop and improve their work skills under the guidance of experienced supervisors.

4. The Role of the Government

To increase Japan's competitive edge, reforming education is an urgent priority, not only for producing the personnel needed for advanced research and development but also for securing and training workers who support the technological and manufacturing base.
With regard to school education, one especially important aspect is qualitative improvement of teachers and their leadership abilities. An international perspective is also needed in drawing out measures on human resources development.

5. Impact of the Falling Birthrate

The falling birthrate will have a complex and serious impact on the socioeconomic structure: the size of the economy will shrink due to less consumption demand, the labor force will decline, the tax and social security burden will grow, and local areas will continue to lose population.
As shown in the "Plus One" program compiled to deal with the falling birthrate, the government is trying to rely too much on enterprises. All levels of society, however, must cooperate and give serious thought to developing and instituting measures for boosting the birthrate.

Chapter 4. Building a More Equitable Social Security System

1. Establishing a Sustainable System

The social security system is the most important component of the safety net for workers and citizens. Steps are needed to hold the rising national tax and social security burden in check, and to reassure the public concerning the future viability of the social security system as a whole. For this, a scenario for reforming the social security system should be drawn up quickly, giving everyone a clear idea of where we are headed.
The reform plan should aim more efficient allocation of benefits through promotion of privatization and regulatory reform. The total package of social and labor insurance, not just the social insurance premiums paid by active workers and employers, and the maximum tolerable premium levels should be studied at the same time.

2. Reforming Pensions

At the next replanning in 2004, rather than tinkering with the existing pension system, the government should focus on the maximum tolerable limit to pension premiums and reform the system so that citizens will not have to worry about major changes in the future. Decisive steps toward comprehensive reform that will involve pain for all, including a reduction in benefit levels to current recipients, are needed.

3. Health and Nursing Care Insurance

From the perspective of improving the health care system's ability to respond flexibly to progress in medical technology and patients' changing needs, it is essential to introduce competition in the field, to improve efficiency and upgrade the standard of care. Public health insurance should cover only the essentials. Individuals should be free to choose supplementary treatment not covered by public insurance which they can pay for by making effective use of private insurance. At the same time, joint stock companies should be allowed to operate medical institutions. Setting up an information framework through which the public could choose the medical institution best suiting their needs and strengthening the functions of health insurance organizations will promote efficiency and improve the standard of medical care.

4. Employment Insurance

The employment insurance contribution rate, shared equally by employers and workers, was increased in 2002 to bolster the system's finances which have been weakened by the prolonged severe employment situation. The sustainability of the employment insurance system, however, will require comprehensive reform. As part of the reforms, unemployment benefits should be offered only to those who truly need them, and the scope and level of benefits reevaluated. At the same time, the system's finances should be put on a sounder footing, from the perspective of cutting down on labor administration costs as a whole.

Chapter 5. Labor Negotiations, Issues for Management

1. Employers' Stance

Management and labor are attempting to determine wages in a practical manner in the face of a deflationary spiral. Maintaining and strengthening competitiveness precludes any further rise in nominal wage levels, and increasing base wage levels is out of the question. Freezing or reviewing the annual wage increment in line with reforming wage systems is another issue that could come up for discussion.
The social phenomenon of the shunto spring labor offensive, when labor unions backed their wage demands with threats to strike to win across-the-board wage increases, is over. Today, rather than wage levels and the amount of wage increases, the two sides are more concerned with discussing the creation of personnel and wage systems to stimulate high value-added labor and the most appropriate combinations of employment types to make this possible. The aim of this year's negotiations is to discuss issues including wage levels and wage systems appropriate for each enterprise and how the social security system should be structured, taking changes in the business climate into account.
We are hopeful that the negotiation style will shift from the "struggle" of the traditional shunto to more discussion-centered meetings.

2. Diversity Leads to Dynamism and Creativity

From now on, individuals and enterprises alike should have a variety of goals and engage in diverse activities. This dynamism will be a force stimulating the emergence of a new economy and society. It will also be the source of the energy to create new markets, technologies and employment opportunities. Management and labor bear a basic responsibility for drawing from the vitality of the people the energy to do something new in the 21st century.

3. The Japan Business Federation's Role

Management and labor are a stabilizing force in society; they should work more closely to contribute to corporate vitality. Employers also have the responsibility of strengthening competitiveness and managing their companies in a responsible manner to win the trust of the market, to ensure the continuation and growth of enterprises.
Our destiny in the 21st century lies in diversity. Seeking spiritual richness, we must aspire to making Japan more open and giving it appeal and vitality. Working for the good of the people and of society will earn employers and other leaders the public's trust. The Japan Business Federation, together with employers, will nurture this aspiration and move toward the revitalization and reform of the economy.

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